Modern blockchain is full of promises of quick and easy money. However, it is crucial to understand whether the tokens you hold are part of a carefully planned scam aimed at taking your hard-earned money. With thousands of different meme coins being issued regularly, determining the safety and legitimacy of tokens is becoming increasingly difficult.
In this article, we will explore effective methods to check for fraud in tokens and projects. These methods can help you avoid scams and increase the chances of achieving profitable growth!
To verify the legitimacy of a token, you can always start with the easiest methods, such as searching on Google and Twitter. This includes researching the token and its team, checking for danger signals or warning signs, and looking for reliable sources of information such as official websites, news articles, and verified social media accounts.
Checking Tokens on Twitter and Telegram
Verified Twitter accounts can help prove the legitimacy of a project. Additionally, you can engage in token discussions to understand the community’s viewpoints and opinions.
Be cautious of projects with a large number of social media followers but minimal activity. Automated comments from fake accounts should also raise red flags. If all comments are “this is a great project” and “to the moon”, be careful.
To check token information on Twitter, enter $TICKER in the search bar. Or use #TOKEN_NAME to find more information about the project.
If the token was recently launched, check the first news about the token. Search $TICKER in the search bar and scroll to the bottom of the summary. Usually, the first news about the token comes from news bots or influential individuals.
An important factor is to research the project’s description on Twitter. If it posts repeated news and uniform buying calls, the likelihood of a scam increases.
When analyzing a project on Telegram, pay attention to the community’s attitude towards the project. Strong community belief and support are positive signals for potential short-term growth.
Check Token Address on Google Search
If you search on the internet and cannot find a clear homepage, “white paper”, or the token’s apparent use, it is likely a scam. When searching for the token address, you should easily find links to a block explorer, official website, and white paper. If not, consider it a warning sign.
Also, be aware that Google ads are often free areas for fraudulent websites. Do not click on ads at the top of Google search results. Make sure you visit the official website to avoid clicking on wallet cleaners or other hacking software.
Checking in the Explorer
Visit the block explorer of the chosen chain and check if the source code has been verified. For example, on the Ethereum block explorer Etherscan, it should look like this. The unverified code displayed below should be a clear warning sign. If the code is not verified, you may be dealing with a scam.
If you want to check a token deployed on another network, use the following browsers:
Base – https://basescan.org/
Solana – https://solscan.io/
Ton – https://tonscan.org/
BSC – https://bscscan.com/
Why don’t scammers verify their code? Because once the contract’s source code is public, anyone can understand the intent behind the contract. Then they will see a ridiculous tax system or a way for developers to steal all your tokens.
Check the Comments Section
This is simple, but most block explorers have a comments section. In most cases, there are no comments, but if the project is a scam, you are likely to find a group of angry mobs in the comments section. So be sure to check. If someone calls it a scam, 99% of the time, it is a scam. If you have been a victim of such activity, do not hesitate to leave a comment.
When analyzing tokens, you can find the comments section (example on Etherscan), but for most tokens, it is hidden.
Check the DappRadar Blacklist
DappRadar allows the community to help identify scam tokens. Once found, you can add it to the token blacklist on GitHub.
Also, if you are researching a token, you can check the blacklist to see if your token is on the list. If the token address is on the list, then the token is definitely a scam.
Check How Many Exchanges the Token Is Listed On
If a token is only traded on a few decentralized exchanges (DEX), it is almost certainly a scam. Listing on centralized exchanges requires KYC and additional trust, and the larger the exchange, the better the reputation of the listed token.
Does this mean tokens listed only on DEX are always scams? No. Some projects do not require a large trading volume, while others may only offer tokens to Web3 users, not token traders.
As most meme coins show significant gains before appearing on CEX, having a token on CEX is not a strict criterion for token analysis.
However, cryptocurrencies listed only on DEX represent higher-risk investments.
To find out which exchanges list the token, go to Coingecko, enter the token address in the “search” bar, and then select “markets”.
If the token is listed on at least one CEX, it is a green signal. In this case, the token is listed on CEXs like Bybit, BingX, Bitget, Gate.io.
Check the Token’s Liquidity
Before investing in a token, you can check the overall demand and available liquidity. Checking a token’s liquidity on platforms like Uniswap V2 or other decentralized exchanges is very easy.
Liquidity refers to the amount of cryptocurrency or tokens locked in a smart contract that allows people to buy or sell assets through (decentralized) exchanges. If liquidity is below $100,000 or significantly decreasing, you are likely encountering a scam.
You can check the liquidity amount on well-known DexScreener, enter the token contract, and you can see the liquidity amount in the middle right section.
If there is a lock symbol inside a green circle next to the liquidity amount, it means the liquidity is locked – another green flag for the project.
Additionally, considering the Fully Diluted Valuation (FDV) or market cap is also important. The larger these numbers are, the more purchasing volume is required for the token price to rise.
Good indicators for such tokens are liquidity amounts starting from $1 million, token age over 2 days, and a liquidity/FDV ratio of approximately 1:10.
Check Third-Party Analysis Tools
Here are some token analysis tools:
Heuristic test – an automatic review of tokens. The lower the score (out of 100), the higher the likelihood of the token being a scam.
Check tokens on honey pots. Honey pots are smart contracts deliberately created with obvious software flaws. When attackers try to exploit the vulnerability, they trigger another hidden code segment, essentially attacking the attacker. Regardless of whether you intend to be a crypto hacker, always avoid using honey pots.
Understanding the Basics of DEXScreener
It records the current token price and helps you assess the real value of the token in real-time and identify major holders.
To identify users who recently purchased tokens for over $5,000, click on “USD” at the bottom of DEXScreener.
Enter the amount $5,000 (optional, you can specify the maximum token purchase amount) and press “Enter” or “Apply”.
Subsequently, all buyers who have recently purchased tokens for $5,000 or more will be displayed.
You can also view the purchase areas of certain wallets. Click the cup icon next to the desired wallet and view all purchase areas and token purchase levels on the wallet chart.
Using De.Fi Antivirus Software to Analyze Tokens
De.Fi is a project that recently distributed airdrops to its community and acts as antivirus software by evaluating token contracts based on various parameters and providing estimated security balances for tokens.
Using TTF Bot
This versatile bot can quickly and automatically analyze tokens, which is very convenient for token hunters. Pay special attention to the amount of locked or destroyed liquidity. If liquidity is destroyed, it is a green signal.
Also, pay attention to the token’s tax scale. If the tax is zero, it is a fact.
Additionally, pay attention to the number of holders and their share of the supply:
If the top 10 holders own more than 30-50% of the token supply, the likelihood of encountering a scam is higher.
Conclusion
By using the above analysis tools, you can learn how to avoid scam tokens and profit from legitimate tokens. However, always remember to do your own research (DYOR).